economic growth and development

• economic growth - measures changes in the physical quantity of goods and services that an economy produced
• economic development - encompasses not just the increase in quantity of output but also its quality and contribution to human happiness 
• economic development may not always go hand in hand: corrupt governments may not be re-investing growth in national product back into the country, if an economy has very high inequality then it is probable that overall improvements in economic growth may not lead to development
• traditional societies - societies who have a very low limit to their production possibility capping their potential for economic development
• traditional economies preparing for take off - economies which are becoming more productive and meet various pre-conditions for successful industrial growth 
• self sustaining growth - this is the transition from agrarian society to a manufacturing economy. output will increase here but only a small section of society will benifit from improved standards of living. at this stage growth takes priority over development
• higher income developing economies have a higher demand for luxury goods and services and are able to focus on both growth and development
• GDP per Capita should be used as the first indicator of development as it give an impression of a nations wealth relative to population size
• total economic welfare = economic welfare derived from goods and services + purchased in the market economy + economic welfare derived from public goods and merit goods proveded by the state + economic welfare derived from quality of life factors inc. (external benifits - external costs)
• national income measures such as GDP were designed purely to measure growth whereas HDI was designed to measure development
• HDI includes: life expectancy at birth, mean years of schooling, gross national income per head. the closer a nations HDI is to 1 the more developed they are
• even HDI isn't a measure of development because It ignores the distribution of income. therefore it may be better to use IHDI
• investment in capitol goods and technical process is essential to the economic development and growth of an economy
• capitol investment in an economy will always move the PPF outward meaning that it will always redact in economic growth but not always result in development
• if there is investment in capitol for education this will result in economic growth and economic development because individuals are able to improve their life as well as the economy
• if there is investment of capitol into arms then it will only result in economic growth not development as arms do not improve standard of living
• corruption is a barrier to development as it diverts scarce resources away from productive uses and concentrates wealth among a few individuals
• institutional factors such as the judiciary, financial systems and legal systems are essential to economic development. without contract law enforcement or financial systems investors will not be able to trust their investment
• poor infrastructure like a lack of roads increases the cost of production to firms meaning that investment is less liekky
• a lack of human capitol as a result of poor education will stunt development as even in the presence of physical investment an economy cannot develop further without workers
• without private property rights infrastructure growth is limited. tradable property eights are essential for the development of capitalist economies
• both macro and micro policy must be used in conjunction to ensure both growth and development
• standard policy such as demand side, fiscal, supply side, and monotary policy must be used to grow which is a pre-condition to development
• pursuing growth for growths sake may lead to outcomes in which the costs of growth such as resource depletion exceed the benefits of higher living standards that growth should bring
• microeconomic policy can be used to correct the market failures associated with growth: taxes and subsidies on demerit and merit goods, redistributive policies to narrow unjustifiable inequality
• the general consensus is that a higher level of state intervention is needed to bring about growth alongside development in low income countries than high income countries
• capitol flight is the sudden withdrawal of money out of a countries. this impacts poor economies more than rich ones
• capitol flight can be reduced if not completely removed by central bank intervention such as applying exchange policy controls
• capitol flight is a major problem in sub saharan Africa, especially in capitol scare economies like Burundi which generate very little saving from their own poor populations
• the orthodox view of wealthy economies is that trade liberalisation is always better than aid. free market economists argue that international specialisation will benefit all the countries involved if done correctly
• the strategic trade theory argument - developed economies only favour free trade when their countries face little or no competition from developing economies. as soon as competition arrises developed economies "pull up the drawbridge" and begin arguing that protectionism is necessary
• it could be argued that the growth of free trade has brought benefits to developing economies such as improved transport. developing economies can benefit from preferential trade agreements and build up industries that can benefit from comparative advantage
• military aid can only be spent on buying the weapons of the donor country
• a hard loan is given in currency and must be paid back at the market rage
• a soft loan has a bellow market rate of interest
• disaster relief is a "band aid" solution in times of crisis that is mostly mitigatory and does not lead to long term development
• lending experts refers to when countries give aid in the form of information such as helping nations develop effective institutions
• aid does help promote development in countries were domestic saving is low through financing otherwise inaccessible domestic capitol
• critics argue that aid often equips nations with "the wrong sort of tech" for example developing goods are often given technology that is too expensive for them to meaintain
• overall trade is more important than aid in relation to economic development. even though aid can facilitate development a nation cannot be sustainable in the long run without trade